El Paso Energy and Coastal Corp. announced plans yesterday torelocate more than 1,200 employees and retain only satelliteoffices at the El Paso Natural Gas headquarters in El Paso, TX, andthe ANR Pipeline headquarters in Detroit, MI, once their merger isapproved by the FTC, which is expected sometime in the fourthquarter. No final decision on staff reductions has been made, an ElPaso spokeswoman said.

The companies intend consolidate the operations of their fivepipeline systems into three organizations, collectively led by JohnW. Somerhalder II. Under the consolidation plan, the combinedcompany’s nationwide pipeline system will be consolidated intothree regional operations. The western region will consist of ElPaso Natural Gas Company and Colorado Interstate Gas Company andwill be headquartered in Colorado Springs, CO. The eastern regionwill consist of ANR Pipeline and Tennessee Gas Pipeline and will beheadquartered in Houston. Southern Natural will make up thesoutheastern region headquartered in Birmingham, AL.

John Somerhalder will continue as the executive vice presidentof the El Paso Pipeline Group. Patricia A. Shelton, currentlypresident of El Paso Natural Gas, will lead the consolidatedwestern region pipelines. Jay Holm, currently responsible for ElPaso’s Australian pipeline assets, will return to the United Statesto become CEO of the eastern region. Reporting to Holm aspresidents of Tennessee and ANR will be Stephen C. Beasley andJames J. Cleary, respectively. The southeastern region will be ledby James C. Yardley, who will continue as president of Southern.Shelton, Holm, and James Yardley will report to Somerhalder.

“This consolidation will create the most effective organizationfor El Paso’s pipeline system,” said El Paso CEO William A. Wise.”Our upcoming merger with Coastal will create an interstatetransmission system that spans the nation, border to border andcoast to coast. This consolidation represents a highly disciplinedapproach to managing this system, allowing us to strike a properbalance between customer focus and operational efficiency. It alsofacilitates a company-to-company exchange of expertise across oursystem and speeds the merging of separate company cultures.”

While the companies will be organizationally merged, the fivepipeline systems will remain separate with separate tariffs andseparate names. Though many back office functions such asaccounting and gas control will be consolidated and relocated tothe new headquarters, field functions and related activities willremain in their current locations. In addition, some employees willremain in the El Paso and Detroit locations. The company will askaffected employees whether they want to be considered forrelocation. Those employees who elect not to relocate will be givenseverance packages. Most moves will occur during the first half ofnext year, and the majority of the plan is expected to beimplemented by mid-2001.

The companies announced their $16 billion polling-of-intereststransaction in January (see Daily GPI, Jan. 19). The merger isexpected to be accretive to El Paso’s earnings per share (EPS)immediately and add more than 5% to EPS in both 2001 and 2002, Wisesaid at the time of the merger announcement. Overall, the twocompanies expect $200 million in cost savings. By comparison, theEl Paso-Sonat merger created more than $100 million in savings andmore than 600 people lost their jobs.

The combined interstate transmission system of the new companywill consist of over 58,000 miles of pipeline, by far the most ofany pipeline company in North America. The system will transportmore than 20 Bcf/d of gas through existing pipeline infrastructure,but will have sole or part ownership in three other new or proposedmajor pipelines, including Alliance, Gulfstream and Independence.The company also will be the second largest gatherer of natural gasin the United States and the third largest U.S. producer of gas.

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